Trading the financial instrument can be an extremely difficult task if you are relatively new in this industry. Forex trading and options trading are pretty much similar and you can earn a decent profit out of trading the financial instrument if you have a solid trading plan and strict trading discipline. There are many forex options trader in the financial industry who jumps into the trading world only to make quick money. But if you truly want to become a successful trader then you must consider trading as a business. Like any other business, it needs strict discipline and proper execution of the trading plan. Statistics suggest that almost 95 percent of the forex options trader lose money in the financial industry due to their lack of knowledge and proper implementation of trading discipline. The remaining 5 percent are the successful traders who are making money consistently in the market out of trading the financial instrument. In this article, we will highlight three deadly mistakes that every options trader make in their trading career.
Revenge trading and overtrading
This is one of the most common mistakes that every currency traders make in the early stage of their trading career. They spend a considerable amount of time in developing a valid trading strategy. Everything works fine in the beginning phase but things dramatically change after incurring few losses in the market. Most of the novice trader start taking low probability trades in the market right after a loss. They become emotional and try to recover their loss in the next trade within a short period of time. In the financial world, such type of trading is known as revenge trading. It’s true that revenge trading will work sometimes but in the long run, this will cost your trading account. Over trading is another phenomena that most of the new traders do since they think that by trading more they will make more money in the market. But in reality overtrading increase the chance of losing money in the forex industry. In the eyes of trained professional overtrading is one of the most lethal weapons that can jeopardize the trading career of forex options trader. If you closely observe the trading history of the professional trader then you will see that most of the professional traders hardly execute two to three orders in a single day. Professional traders rely on their quality trade execution rather than quantity.
Ignoring the long term trend
There is saying the financial world that always trades in favor of the long-term prevailing trend. If you truly want to become a professional forex options trader then you must know how to identify the long-term prevailing trend in the market. Most of the trained option traders use the daily and weekly chart to identify the long-term prevailing trend in the market. Once you identify the potential prevailing trend in the market make sure that you are trading in favor of the current trend. Most of the new traders try to pick the top and bottom of the currency pair but eventually they incur losses in the market. For instance, if you spot a long-term bullish trend in the market and execute your short order in the market then the chances of success are reduced to a great extent. On the contrary, if you look for buying call option opportunity in the bullish market then your success rate will dramatically increase.
This is one of the most common mistakes that every single trader makes at the early part of their trading career. They start their trading career with a very strict trading discipline and after two or more consecutiveness winners they become overconfident and start taking excessive risk in the market. It’s true that taking a huge risk might give you lucrative income at certain times but in the long run, you will end up by losing a big portion of your trading account. Experts always trade with low risk and make sure that their losing trades is not getting to bigger. Sometimes the traders lose their hard grip on money management after incurring few losses in the market. They want a quick recovery and for which they take unnecessary risk in the market in order to recover their loss. But such an aggressive approach is very dangerous for your trading career. As a professional options trader, you must follow proper risk management factors even though you might think that a certain trade will hit take profit for sure. Always make sure that you are making more money on your winners than you losers. Don’t cut your winning trade too early and don’t carry your loss and allow it to grow bigger.
Summary: If you truly want to become a successful options trader then you must avoid these three deadly mistakes in your trading career. A single mistake is enough to wipe out your full trading account in the financial world. When you start your trading make sure that you have a very nice and calm trading environment since these are the factors that enhance your technical and psychological skills. If you think that you can trade in a chaotic environment then you are wrong. You need to stay focus 100 percent of the time and make sure that you are executing your trading order with a logical reason. Never trade with the money that you can’t afford to lose. And don’t get panic if you have one or two losing months in your trading career since losing is just a part of your trading career. Those who manage their losses properly are the successful traders in the financial world.